Real estate investment trust, or REIT, exchange traded funds may continue to generate higher profits as interest rates remain suppressed. Even if rates do rise, REITs could follow higher growth as the assets move less like equities and more like real estate.
According to a Paragon Report, REITs are taking advantage of the low interest rates to boost earnings and raise dividends for investors. For instance, mortgage REITs are dependent on interest rate spreads – higher rates makes it less profitable for REITs to borrow. [Real Estate: List of REIT ETFs]
Federal Reserve Chairman Ben Bernanke has stated his intent to keep interest rates low until 2014 and even suppress borrowing costs if the economy is in need.
REITs are securities that trade like stocks but are required to pay out 90% of their taxable income to share holders as dividends.
JP Morgan Asset Management projects U.S. REIT dividends may grow 6% on average per year over the next five years and produce total returns of up to 10% if dividend yields are 4%, reports Michael Aneiro for Forbes. [ETF Chart of the Day: REITs]